Are the tides turning against the U.S. dollar?
We’re taking a closer look at AUD/USD ahead of Uncle Sam releasing a couple more labor-related economic reports.
Before moving on, ICYMI, yesterday’s watchlist checked out USD/CAD’s triangle consolidation ahead of the FOMC meeting minutes release. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
FOMC minutes from the December meeting showed that members saw cuts coming in 2024 but were uncertain about when rate cuts may occur
Japan’s December manufacturing PMI revised higher from 47.7 to 47.9; “Output and new orders both declined at faster rates amid reports of client uncertainty in both domestic and overseas product markets”
China’s Caixin services PMI for December: 52.9 (51.6 forecast, 51.5 previous); “Companies signalled solid increases in activity and new business, with the latter expanding at the quickest pace since May”
France’s preliminary CPI for December: 0.1% m/m (0.2% m/m forecast, -0.2% m/m previous); Annual rates at 3.7% as forecast (3.5% previous)
Spain’s services PMI accelerated from 51.0 to 51.5 in December, its highest reading since July
Italy’s services PMI improved from 49.5 to 49.8 in December; “The latest decline signaled a sustained contraction in output across the Italian service sector”
France’s services PMI for December revised higher from 44.3 to 45.7, the highest in four months, but details still “signaled a furhter solid reduction in output across France’s service sector”
Germany’s services PMI for December was revised higher from 48.4 to 49.3; Surveys showed “a drag on services activity from tightened financial conditions and weakness in the broader economy”
Eurozone’s services PMI for December improved from 48.1 to 48.8; “Demand for euro area goods and services continued to weaken while employment levels fell again”
Price Action News
The Japanese yen was once again a clear loser among the major currencies today as more traders priced in the higher bar for the Bank of Japan (BOJ) to exit from its easy monetary policies.
It didn’t help the safe haven yen that not-so-disappointing economic reports and talks of easing inflation pressure in the FOMC meeting minutes helped risk-taking in the late Asian and early European session trading.
JPY is trading the weakest against EUR, NZD, and GBP while showing the least losses against fellow safe havens like USD and CHF.
Upcoming Potential Catalysts on the Economic Calendar:
U.K.’s final services PMI at 9:30 am GMT
U.K.’s mortgage approvals at 9:30 am GMT
U.K.’s net individual lending at 9:30 am GMT
U.S. Challenger job cuts at 12:30 pm GMT
U.S. ADP report at 1:15 pm GMT
U.S. initial jobless claims at 1:30 pm GMT
U.S. final services PMI at 2:45 pm GMT
EIA crude oil inventories at 4:00 pm GMT
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! ️
Earlier this week, we caught AUD/USD hanging out near a short-term resistance just before the pair dropped like a rock to new intraweek lows.
But that was ages ago. The pair is now showing us higher highs and higher lows after finding support from just above the S1 (.6700) Pivot Point and psychological level.
Can AUD/USD extend its upswing today? Or are we looking at an opportunity to short AUD/USD from a higher level?
In the next few hours, we’ll see a bunch of jobs-related U.S. reports like the Challenger job cuts, initial jobless claims, and the U.S. ADP report. Numbers that support Fed rate cuts may weigh on USD and bump “riskier” assets like AUD.
AUD/USD, which is near a short-term trend line support and the Pivot Point (.6730) line, could draw in buyers and see enough bullish momentum to revisit areas of interest like the R1 (.6770) Pivot Point line.
That’s assuming that the U.S. dollar will give up its domination though. If today’s headlines lead to even more risk aversion, then AUD/USD could see enough selling pressure to break below its trend line support and head for previous inflection points like .6725 or .6700.
For now, it doesn’t seem like there’s a fundamental catalyst for AUD/USD to break its intraweek upswing. Watch the areas of interest that we’ve marked especially during data releases so you can manage your risks in case of a trend continuation or a breakout!